Fracking for natural gas involves pumping a slurry of sand, water, and chemicals deep underground at high pressure – cracking open natural-gas-bearing shale deposits and allowing the gas embedded there to emerge. The process has been hailed as a boon for US energy supplies and has single-handedly boosted US natural-gas reserves in recent years.

But a growing number of residents in Texas, Pennsylvania, Colorado, and other states say the technique has fouled their drinking-water wells and even caused the tap water coming out of their faucets to smell like industrial chemicals.

In March, the EPA announced it would study the “potential adverse impact” that hydraulic fracturing might have on drinking water. The agency is holding public meetings in major oil and gas production regions to get citizen, industry, and expert input. First results of the study are expected in late 2012.

Of course it was too good to be true. The sudden increase in natural gas produced in this country held out the promise of lowering our dependence on foreign oil. We had to realize that this good news couldn’t come without consequence.

To add to the worries enumerated in the above story, I recall the troubles that came to light many years ago in Rocky Mountain Arsenal in Colorado. There was a sudden rise in minor earthquakes that was attributed to the pumping of industrial waste into underground storage. The threat was so serious that such pumping was halted. I’m off to track down the story of the earthquake in Indiana, Indiana earthquake strikes in rare location, to see if it is near any natural gas wells that have been subject to fracking.

The above map on the left is from the WikiPedia article Indiana Gas Boom. The map on the right shows Howard County which contains Greentown, near the epicenter of the quake.

This gas boom started in the late 1800s. The WikiPedia article seems to be written in 2008. Here is an excerpt relating to the current situation.

Smaller pockets of natural gas exist in Indiana at depths that could not be reached in the boom era. The state has a small natural gas producing industry in 2008, but residents and industry consume about twice as much natural gas as the state produces. In 2005 there were 338 active natural gas wells on the Trenton Field. In 2006 Indiana produced more than 290 million cubic feet (82 million cubic meters) of natural gas. This made it the 24th largest producing state, far below the major producers.[9]

It is estimated that only 10% of the oil was drilled from the Trenton Field, and approximately 900 million barrels (140,000,000 m3) may remain. Because of the size of the field, pumping gas back into the well to increase pressure, as is commonly done in smaller fields, is impossible. Because of the depth and limitations of hydraulic pumps, it was never cost effective to use them to extract oil. It was not until the 1990s that efficient methods of artificial lift were discovered. This has allowed some of the oil to extracted, but at far higher costs than when sufficient natural gas is present.

Several other prominent shale plays include the Barnett Shale in Texas with proven reserves of 2.5 tcf and potentially up to 30 tcf; the Haynesville Shale in Northern Louisiana, Southern Arkansas and Eastern Texas with an estimated 250 tcf of natural gas resources; and the New Albany shale in Illinois and Indiana, with reserves estimated at 160 tcf.

Among the major players in the New Albany shale are Atlas Energy, which holds leases of over 284,000 acres. It has announced in a press release that it plans to drill over one hundred wells on leases that it holds in southwestern Indiana by the end of 2009.

The leases that Atlas Energy holds are located in Sullivan, Knox, Greene, Owen, Clay and Lawrence counties of southwestern Indiana.

The other blog post refers to another possibility for the cause of the Indiana earth Quakes. The blog writer is concerned about this structure described below becoming ‘unhinged.’

Evidence of Unconformity at the Top of the Trenton Limestone in Indiana and Adjacent States in BULLETIN OF THE AMERICAN ASSOCIATION OF PETROLEUM GEOLOGISTS, VOL. 50, NO. 3 (MARCH. 1966). PP. 533-545

August 30, 2011

I finally found the reference to the Rocky Mountain Arsenal history that ties it to earthquake activity. Colorado Earthquake History on the USGS site says the following:

In 1961, a 12,000-foot well was drilled at the Rocky Mountain Arsenal, northeast of Denver, for disposing of waste fluids from Arsenal operations. Injection was commenced March 1962, and an unusual series of earthquakes erupted in the area shortly after.

…

During 1968, ten slight shocks were felt in Colorado. Only one, on July 15, caused minor damage at Commerce City. In September of that year, the Army began removing fluid from the Arsenal well at a very slow rate, in hope that earthquake activity would lessen. The program consisted of four tests between September 3 and October 26. Many slight shocks occurred near the well during this period.

This video is the first outline I have seen of exactly what criminal acts Khodorkovsky’s has been charged with doing.

I know that the RT in the source of this video used to stand for Russia Today, so you can decide for yourself whether or not you want to believe what you hear. Of course the reporters are only saying that this is the prosecution’s case. They are not passing judgment on the veracity of the case.

At least we have some specific accusations that the defense can choose to refute or not. It gets us a little ways away from the argument that this case is just political versus no, it’s not.

To summarize, Khodorkovsky has been accused of transferring oil amongst his domestic companies at low prices until a final transaction got the oil out of Russia into a foreign company owned by Khodorkovsky. That company sold the oil at world market prices, the same oil it had acquired at cheap collusive prices.

This is the kind of thing for which Ken Lay and his Enron associates were convicted and sentenced to jail.

No wonder the people in this country who want to defend such practices are so dead set on claiming this was but a political trial.

Can you imagine if officers of U.S. companies had to work under this type of threat or the threats in China where some financial shenanigans garner a death sentence?

Now it is up to the people claiming this was a political trial to give us a defense against the specific acts with which Khodorkovsky has been charged.

Also note this report titled, Former oil tycoon ‘admits fraud’, may get lighter sentence. The ‘admits fraud’ part is in quotes, meaning this is the prosecution charge, not necessarily something borne out by the report.

Here is an answer to a non-question. No economist who has escaped the clutches of Milton Friedman thinking would say or has said that stimulus and tax-cuts are a long-term solution. The interviewer and the headline writer are obviously no match for the interviewee. The interviewee quickly debunks the premise of the headline by stating the obvious.

I think the interviewee has a good understanding of our economic problems and even manages to get some information out despite the distracting questions from the interviewer.

I apologize for the fund-raising that precedes the actual interview. You can read the transcript at Real News while muting the fund-raising appeal.

The ownership of large tracts of the Russian state by the oligarchs is a poisonous legacy of Yeltsin, … In an ideal world, the oligarchs, who achieved their fabulous personal wealth through their grossly immoral carpetbagging during the chaos of the breakup of the USSR, should all be dispossessed and slung in jail.

The last letter put it in terms of an analogy comparing criticism of the “selective prosecutions”:

is like saying that because a supermarket cannot prosecute all shoplifters, it should not prosecute any.

As I said, this mirrors my own initial reaction. I don’t know the details of the case against Khodorovsky nor the details of his acquisition of wealth. However, I would have to find out that his acquisition of wealth was due to the great economic value he added to Russia and the facts of the case against him were not true before I would change my attitude. I know our politicians and our media would rather that we believe Khodorkovsky is being picked on because of his political dissent, but I am not buying it without the requisite proof that what they say is borne out by facts..

Witnessing the failure of economic policy over the past three years has led me to suspect that the kind of moderate economic policy regime that Mr. DeLong and I support – one that largely takes a hands-off approach to the markets, but where the government is always standing by to rein in excesses and fight slumps – is inherently unstable.

It can last for a generation or two, but not much longer. And I am not only referring to financial instability – intellectual and political instability are equally crucial.

It’s a deeply reasonable approach – but it’s also intellectually unstable, because it requires some strategic inconsistency in how you think about the economy. On the micro scale, you must assume that individuals are rational and markets will rapidly clear (that markets will adjust so that supply is equal to demand); on the macro scale, you must assume that there will be market frictions and individuals will sometimes behave irrationally.

Economists were bound to push at the dividing line between micro and macro -which in practice has meant trying to make macro more like micro, basing more and more of the theory on optimization and market-clearing. And it was probably inevitable that a substantial number of economists would simply ignore the realities of the business cycle that didn’t fit their models.

Fortunately we have the relatively new field of behavioral economics that might be making micro more like macro. Behavioral economists study the way people actually behave economically rather than the way the theory says they should behave. We find that even at the micro level there is some behavior that is far from rational and optimal.

If only the politicians and business people could catch up to the behavioral economists before our economy is sent to ruin, we might all survive the current Great Recession.

Whether or not you believe in the ideas expressed by the interviewee, you might get a glimpse of where some people see politics going in the future.

The WikiPedia article has the following citation:

According to a variety of sources such as Der Spiegel and Reporters Without Borders, the channel presents pro-Kremlin “propaganda”. Russia Today staff have nonetheless claimed that their coverage was “fair and balanced.”

And I thought Faux Noise had trademarked fair and balanced.

In any case, many people including me have said that it was the competition with Communism that kept western style Capitalism humane. Something like this might rise again if unchecked Capitalism goes too far. You might recognize the possibility of this happening whether or not you are a fan of Capitalism or Communism.

I listen to what Simon Johnson’s has to say in his article Voodoo Economics Revisited, but I don’t necessarily swallow it hook, line, and sinker.

What we are seeing is agreement across the aisle on a very dangerous approach to public finance: a continuation and extension of what President George H.W. Bush memorably called “voodoo economics.” Its consequences are about to catch up with America, and the world.

The following paragraph hints at my qualms about Johnson:

The market is nervous — mostly about the prospect of large fiscal deficits as far as the eye can see. Some commentators dismiss this as irrational, but, again, that is wishful thinking. The path-breaking work over many years of Carmen Reinhart, my colleague at the Peterson Institute in Washington, makes this very clear — no country, including the US, escapes the deleterious consequences of persistent large fiscal deficits. (Indeed, her book with Ken Rogoff, This Time Is Different, should be required reading for US policymakers.)

I think Johnson is probably right about the long term consequences of “large fiscal deficits as far as the eye can see”. I am less sure about his opinions of short term fiscal stimulus in the middle of a recession. Of course, given the fact that Reagan/Bush/Bush used deficits when they shouldn’t have, has left me wondering if their actions ruined the possibility of rescuing the economy with correctly timed stimulus now. It’s a worry, but I don’t know what to do instead. I don’t know whether John Maynard Keynes talked about necessary fiscal stimulus applied after unnecessary stimulus has wrecked his weapon of choice just when it is truly needed. Perhaps Keynes should have pointed out that theoretically his policy prescriptions are the right ones, but politically and sociologically, they are impossible to carry out in a Democracy.

As a former chief economist of the IMF, I am unsure of how much credence to put in what Johnson says. He certainly has plenty of experience with trying to rescue faltering economies. However, much of the advice that the IMF has given over the years has had terrible consequences on the economies that have taken its advice. I have always had doubts about Johnson’s association with The Peterson Institute in Washington, D.C. The benefactor of the institute has a somewhat one track mind in his thinking on economics and the research that he wants his institute to support. That one track thinking is probably consistent with the advice issued by the IMF.

I had always hoped that Johnson was not a prisoner of these two institutions and that his presence at MIT had some significance. Perhaps my hopes were like my hopes for Obama. The good parts may be good, but I am relearning that the bad parts cannot be ignored.

According to Edelman, here is how the insider-outsider interaction plays out (p. 23-28; as you read this, keep in mind something like Obamacare, Dodd-Frank, or the year-end tax bill):

as an introduction to the following quotes from the book:

Tangible resources and benefits are frequently not distributed to unorganized political group interests as promised in regulatory statutes and the propaganda attending their enactment…

and

The most intensive dissemination of symbols commonly attends the enactment of legislation which is most meaningless in its effects upon resource allocation. In the legislative history of particular regulatory statutes the provisions least significant for resource allocation are most widely publicized and the most significant provisions are least widely publicized…

Is it any wonder that some of us objected to the tax deal? Is it any wonder why we are so frustrated by the acceptance of this outcome by so many people?

In the comments on the review, one person noted that the article Symbols and Political Quiescence by Murray Edelman published in 1960 in the American Political Science Review may be the basis for the part of the book reviewed by King.

One of “the best and the brightest” died last week, and in Richard Holbrooke we had a perfect example of the dark mischief to which David Halberstam referred when he authored that ironic label. Holbrooke’s life marks the propensity of our elite institutions to turn out alpha leaders with simplistic world-ordering ambitions unrestrained by moral conscience or intellectual humility.

I wrote the law based on my reading of the media and my 6-years of post high school mathematics training. I have never claimed that I was particularly good with the statistical end of mathematics, yet I could recognize a lot of the flaws in news stories. Because Ben Goldacre does seem to be a statistics expert, he is able to point out flaws in the media far beyond what I would have suspected. His explanations will make it easy to recognize these errors when I see them in the future.

In addition, he points out that flawed interpretations of statistics and probabilities extend far beyond the media and have consequences far more severe than a misinformed public.

It is not only that people (big pharma flacks) lie with statistics, it is also that people just don’t understand how to apply statistics nor understand how to interpret them. So, even with the best intentions in the world, if you don’t know what you are doing with statistics, what seem like perfectly reasonable conclusions to you are just not borne out by the numbers when they are understood correctly.

There are many experts who do understand all this and know how to figure out what is statistically significant and what is not. Their interpretations might surprise you, until the reasoning is explained.

In Chapter 11 titled Bad Data, Goldacre pulls together quite a few of ways that people get fooled.

He writes in a very entertaining way, and I can hardly do justice to his ideas here, but I will try to give you a hint at some of what you should know.

Using relative risk instead of natural frequencies.

Let’s say the risk of having a heart attack in your fifties is 50 percent higher if you have high cholesterol. That sounds pretty bad. Let`s say the extra risk of having a heart attack if you have high cholesterol is only 2 percent. That sounds OK to me. But they’re the same (hypothetical) figures. Let’s try this. Out of a hundred men in their fifties with normal cholesterol, four will be expected to have a heart attack, whereas out of a hundred men with high cholesterol, six will be expected to have a heart attack. That’s two extra heart attacks per hundred. Those are called natural frequencies.

Choosing your figures

He quotes from an article in the UK’s Independent explaining a change of heart in their policy on cannabis.

In 1997, this newspaper launched a campaign to decriminalise the drug. If only we had known then what we can reveal today . . . Record numbers of teenagers are requiring drug treatment as a result of smoking skunk, the highly potent cannabis strain that is 25 times stronger than resin sold a decade ago.

By the time he has finished, he shows that the number from the government report that the paper uses as its authority for the information says no such thing. He shows that you might conclude that the number is double, not 25 times higher. Even the doubling is a misinterpretation of the data. More over, this scare about the multiplying strength had been used years before by Ronald Reagan. Had you multiplied together the increase noted by Reagan in the 80s with the increase mentioned by the paper in the 90s, It would require more THC to be present in the plant than the total volume of space taken up by the plant itself. It would require matter to be condensed into superdense quark-gluon plasma cannabis. For God’s sake don’t tell the newspapers such a thing is possible.

Misunderstanding statistical significance

For his example he uses

…an article in The Times (London) in March 2006 headed: COCAINE FLOODS THE PLAYGROUND. Use of the addictive drug by children doubles in a year, said the subheading. Was this true?

If you read the press release for the government survey on which the story is based, it reports almost no change in patterns of drug use, drinking or smoking since 2000.

He goes through the process of explaining how you get from some initial numbers used by the newspaper to the quite correct analysis in the government report to show that there was really almost no change.

Poorly chosen questions in a survey where the respondents choose whether or not to respond to the survey

This one is so obvious, I’ll let you go to the book to read his instructive example.

Misunderstanding the math of predicting very rare events

The examples are very revealing, but too hard to summarize here. One of the example he uses shows the futility of a psychiatrist’s trying to predict which of the psychiatrist’s patients is likely to commit a murder.

The prosecutor’s fallacy

This is related to the above, but in this case the prosecutor uses statistics to show that an innocent explanation for the crime is unlikely without telling you that the criminal explanation is even more unlikely. He uses an actual case to demonstrate this problem.

Using the occurrence of an unlikely event to prove that something weird has happened

In the introduction to this discussion of an actual criminal case, he uses a quotation from renowned physicist Richard Feynman to start you thinking about the absurdity he is about to describe.

You know, the most amazing thing happened to me tonight. I was coming here, on the way to the lecture, and I came in through the parking lot. And you won’t believe what happened. I saw a car with the license plate ARW 357. Can you imagine? Of all the millions of license plates in the state, what was the chance that I would see that particular one tonight? Amazing . . .

If you don’t catch the absurdity of the point Feynman was making, then this comment by Goldacre, might help:

There is also an important lesson here from which we could all benefit: unlikely things do happen. Somebody wins the lottery every week; children are struck by lightning. It’s only weird and startling when something very, very specific and unlikely happens if you have specifically predicted it beforehand.

Later he explains what is wrong with the court case he uses as an example.

First he makes an analogy about blindly firing thousands of bullets from a machine gun at a barn and then finding and circling three bullet holes close together to prove that you are an excellent shot. He ties the analogy to the prosecution he is describing

You would, I think, disagree with both my methods and my conclusions for that deduction. But this is exactly what has happened in Lucia’s case: the prosecutors found seven deaths on one nurse’s shifts, in one hospital, in one city, in one country, in the world and then drew a target around them.

He generalizes the problem with what the prosecutor did.

This breaks a cardinal rule of any research involving statistics: you cannot find your hypothesis in your results. Before you go to your data with your statistical tool, you have to have a specific hypothesis to test. If your hypothesis comes from analyzing the data, then there is no sense in analyzing the same data again to confirm it.